"Record High Competition Rate" Seoul Subscription, Increased Competition Expected Due to Price Ceiling System

[Asia Economy Reporter Kim Yuri] As the competition rate for apartment subscriptions in Seoul has reached an all-time high this year, there are expectations that competition will become even fiercer when complexes subject to the private land price ceiling system come onto the market.

According to Real Estate 114 on the 2nd, the average subscription competition rate for apartments in Seoul from January to September this year was 68 to 1, the highest since surveys began in 2002. In August, among the 10 housing types of 'DMC SK View I-Park Foret' sold in Susaek Jeungsan New Town (Redevelopment Promotion District), three recorded competition rates exceeding 1000 to 1. Interest in apartments supplied at prices lower than market prices due to the Housing and Urban Guarantee Corporation (HUG)'s price control has led to a concentration of demand in the subscription market.

The winning score is also rising. Looking at the average winning scores by range for 6,148 general supply units of private apartments in Seoul that received subscription applications until September this year, the number of units in the 60 to 70 points range was 3,500 units (56.9%), the largest share. Adding the 2,144 units (34.9%) that won with an average score between 50 and 60 points, more than 90% of the total general supply units went to applicants with an average score between 50 and 70 points.

Compared to the same period last year, when only 4,289 units (57.1%) out of 7,514 general supply units in Seoul fell within the 50 to 70 points winning score range, it is analyzed that the subscription scores for stable winning have significantly increased this year. In fact, in the Gangnam 3 districts (Gangnam, Seocho, Songpa), where housing supply is expected to decrease due to reconstruction regulations and the private land price ceiling system, the score cut-off rose to 46 points from 25 points last year. Unlike last year, when there were no perfect score winners, this year perfect score applicants (84 points) appeared in housing types priced below 900 million KRW in two complexes: Heukseok River Park Xi in Dongjak-gu and Sinmokdong Paragon in Yangcheon-gu.

Industry experts expect that competition rates and score competition will intensify further for apartments subject to the upcoming price ceiling system. The Ministry of Land, Infrastructure and Transport expects that when the price ceiling system is applied, the general sale price will be about 5-10% lower than the price set by HUG's high-price review. Under the price ceiling system, the government sets the sale price based on the basic construction cost, land cost, and additional costs announced twice a year.

Experts believe that if prices are set lower than the controversial HUG price controls, competition among subscription applicants will intensify, and concerns about supply contraction will deepen. In fact, many reconstruction associations worried about the lower general sale prices under the price ceiling system are showing signs of choosing post-sale. Although the price ceiling system is unavoidable, post-sale allows reflecting the continuously rising land prices, which can raise the sale price accordingly. Kyunghee Yeo, Senior Researcher at Real Estate 114, said, "Until September this year, no apartments applied with the price ceiling system were supplied as approvals were rushed, but when price ceiling system housing is supplied later, competition for subscription scores will become even fiercer."